I'm just curious why some people are so into trading futures? Is it simply due to the leverage? Unless you have a tiny capital and are seeking to multiply it by many times, I don't see what the benefits of trading futures over equities are. The losses are too big in futures that any leveraged profit from it is counterbalanced by the losses.
I tend to hold long positions in several commodities - mainly via ETFs rather than futures or actual physical commodities that I would have to worry about storing, keeping secure, having liquidity for, etc. Gold and crude are always mainstays in my portfolio, and I'm also partial to silver and a little nat gas as well. I also often have long positions in several other metals and an agricultural index. I may load up on them after a selloff and scale out of them some after a big runup, but I don't really "trade" in and out of them very often, and I'm not one to short them - because of the volatility and potential unlimited upside of the commodities and downside of short positions on them. And I limit my exposure to commodities to a small minority position of my overall portfolio.
higher leverage which can mean much greater returns. I get bored easily so the idea of holding onto a stock for 6 months makes me want to go to sleep. I like that they are more macro-focused in nature and not so company specific.
I see commodities as long term investments and they are part of my investment portfolio. The risky nature of short term trading on commodities makes it difficult to trade in them. I enjoy keeping an eye on the world economy and the effect on commodity prices. The value of my positions in commodities is only a small portion of the overall value of my portfolio. To me it is for a bit of fun and also as a gauge to market conditions.
As a long term investment commodities can be useful since, especially if you have a lot of knowledge about the commodity in question, it can be easier to predict the long term price changes since it follows supply and demand.
I was burned quite a bit by trading commodities in the past. Admittedly I did not know as much about the commodity as I should. I am staying away from them until I get more solid information on one.
I haven't touched them myself since I have no real info about them. But people working in a business related to them can have a good idea of where the price will be in 3-4 months.
How do you go about forcasting how much the commodity will be 3-4 months down the road? With the rising and falling of everything each day, what are the indicators? I have never purchased one, but this seems interesting.
Leverage can be as high or as low risk as the trader desires. If you happen to be a prudent trader, you will not risk any more than 2% of your account on any one position. No action to enter a trade should be considered, until the number of contracts, based on your decided upon level of exposure has been calculated. Trading with high levels of exposure is almost guaranteed to end in tears, especially for a novice trader.
Everything is decided by supply & demand. Take corn for example.. if you know that the crops were producing badly and that each and every chinese person has fallen completely in love with corn, then you can assume that soon the price will go up since there is a lot of demand but not a lot of supply. Obviously you need this info before anyone else... for example by knowing some corn farmers etc.